With the adoption of the U.S. Constitution, the American people brought into existence the most unusual way of life in history, one that led to the greatest economic miracle that mankind has ever seen. Americans not only discovered the solution to poverty but also experienced the greatest outburst of charity in history.
Ironically, when the delegates met at the Constitutional Convention in Philadelphia, they initially had no intention of forming a new national government. The purpose of the meeting was simply to come up with ways to amend the Articles of Confederation, which had been America’s governmental system since the time of the revolution. Problems had arisen under the articles, such as trade wars between the states, and so the initial purpose of the convention was simply to figure out ways to iron out those problems.
Instead, the delegates, meeting in secret, proposed a different form of governmental structure, one that could be labeled a “limited-government republic.”
Throughout history, governments had operated under the assumption that government wielded inherent powers to do whatever the rulers decided was in the best interests of the populace. These had come to be known as “police powers.” They vested government with the power to do whatever was necessary to protect the “health, safety, morals, and welfare” of the people.
The American people were not interested in that sort of government because it oftentimes enabled government officials to exercise omnipotent powers that resulted in tyrannical regimes. They preferred a government whose powers were extremely weak. Indeed, under the Articles of Confederation, which was essentially a pact between independent sovereigns, the federal government didn’t even have the power to tax.
Thus, if the Constitution had proposed a government with the inherent “police powers” that had characterized governments throughout history, it is a virtual certainty that our ancestors would have rejected it and simply continued operating under the Articles of Confederation.
Thus, to secure approval of the new proposal, the Founders formed a government with limited powers — ones that were expressly enumerated in the Constitution. That is, if a power wasn’t enumerated, it simply could not be legally exercised.
Knowing that it was the propensity of government officials to exercise as much power as they can, the proposed new government included a U.S. Supreme Court as part of a federal judiciary. It would be the responsibility of the judiciary to enforce the Constitution against the rest of the government.
The Bill of Rights
Americans, however, were still leery. Even though the Constitution’s enumerated powers were few and limited, they still were concerned about the possibility that government officials would end up exercising totalitarian-like powers and that the federal judiciary would fail to fulfill its responsibility to enforce the Constitution.
That’s what the Bill of Rights was all about. It was designed to send a message to government officials: Do not use your powers to destroy or infringe our rights. The first two amendments protected fundamental rights, such as freedom of speech, freedom of the press, freedom of religion, and the right to keep and bear arms.
The Fourth, Fifth, Sixth, and Eighth amendments are fascinating because those amendments showed that our ancestors were concerned about federal officials targeting people with extrajudicial punishment, including arbitrary incarceration, execution, assassination, or forfeiture of property. Those amendments were designed to ensure that important prosecutorial protections are guaranteed, such as trial by jury, due process of law, right to counsel, right to confront witnesses, and others.
The Ninth Amendment emphasized that people’s rights were not limited to those mentioned in the Constitution.
The Tenth Amendment stated that states would possess the powers that were not delegated to the federal government, unless the state was expressly prohibited by the Constitution from exercising a particular power. Thus, it was understood that the states would be vested with the traditional “police powers” that had characterized governments throughout history — that is, the powers to regulate the “health, safety, morals, and welfare” of the citizenry. However, it was also understood that state constitutions could limit the powers of state governments.
Thus, America ended up with a federal government of limited powers and with state governments whose powers were subject both to the federal Constitution as well as their respective state constitutions.
Sound money
This unusual type of governmental system shocked the world. Having lived under governments with omnipotent powers for centuries, the people of the world could not imagine a government whose powers had been limited by the people themselves.
For example, consider the issue of money. The federal government was given the power to coin money. It was not given the power to emit “bills of credit,” which was the term used at that time for paper money. Therefore, the federal government could not establish a monetary system based on paper money.
What about the states? Ordinarily, the Tenth Amendment would ensure that the states would be empowered to issue paper money, unless a power was expressly prohibited by the Constitution. The Constitution did expressly prohibit the states from emitting “bills of credit” (paper money) and also stated that no state could make anything but gold and silver legal tender.
Thus, the Constitution established gold coins and silver coins as the official money of the United States. It was a system that not only brought the soundest money in history into existence but was also a prime factor in the economic miracle that America experienced into the nineteenth century.
This governmental system bought into existence the most unusual and freest society in history. But permit me to point out that there was one horrific violation of freedom that had originated before the Constitution and that continued into the first half of the nineteenth century. That violation was, of course, slavery. There were also other violations of freedom, such as matters relating to women’s rights and tariffs.
The most unusual society in history
Let’s jump to the period of from 1870 to 1910, which I consider the greatest and freest period in history. Imagine the following:
- No income taxation. People were free to keep everything they earned, and there was nothing the federal government could do about it.
- No Social Security, Medicare, Medicaid, or other welfare programs.
- Hardly any economic regulations. People were free to open businesses and pursue occupations without a governmental license or permit. No minimum-wage laws.
- Open immigration. Although government controlled the movements of people from Europe and Asia, the government let in the vast majority of migrants to the United States. In the American southwest, people were free to cross the U.S.-Mexico border without any restrictions or checkpoints whatsoever. Millions of immigrants flooded into America.
- No gun control.
- No paper money. No Federal Reserve System or central bank. Gold coins and silver coins were the nation’s official money.
- No enormous, permanent standing army.
- No national-security state (Pentagon, CIA, and NSA).
- No foreign wars, interventions, coups, invasions, occupations, or state-sponsored assassinations.
- No foreign aid.
- No governmental school systems.
The solution to poverty
The result of this unusual society was the most prosperous nation in the history of man. The standard of living grew by leaps and bounds during this 30-year period — 1870 to 1910. In fact, Americans, whether wittingly or unwittingly, had discovered the solution to poverty.
Throughout history, the vast majority of people had lived lives of abject poverty. That’s because their governments tightly controlled their economic activity with rules and regulations, many of them intended to protect the poor from the rapaciousness of the rich. Moreover, governments had almost always taxed citizens heavily to ensure that the regime had sufficient money to run its operation, wage its perpetual wars, and take care of the citizenry with welfare or “poor relief.” That left people with little money to sustain their families.
Americans discovered that when people were free to keep everything they earned, they would save a large portion of their income, which they would deposit into banks. The banks would then lend those savings to businesses, which would use the money to purchase tools and equipment that would make their workers more productive. More productivity meant higher revenues for the business, which would mean higher wages for the workers. It was a cycle that resulted in higher standards of living for everyone, especially the poor. Some families were going from rags to riches in one, two, or three generations.
By the same token, Americans were showing the world the fantastic economic results of a “free enterprise” system — that is, a system in which economic enterprises were free of government control and regulation. With every economic exchange, people’s standard of living would rise. That’s because in every trade, people were giving up something they valued less for something they valued more. Thus, with the mere act of trade, people’s economic well-being was soaring.
At the same time, everyone was benefiting from sound money. That’s because with the gold-coin, silver-coin standard that the Constitution established, neither the federal government nor the state governments could plunder and loot people through the inflation of paper money.
There was another outcome from this unusual economic system — the most charitable nation in history. When people were free to accumulate unlimited amounts of wealth, they used large portions of their health to benefit mankind — and not to get an income-tax deduction, because there was no income tax. This was how the hospitals, churches, museums, opera houses, and libraries got built. At the same time, there were so many organizations voluntarily formed to help others that it was impossible to keep track of them all.
The turn toward socialism and empire
Needless to say, the world marveled at this political and economic miracle. And then everything changed.
People began pointing to the horrific conditions in America’s factory system, especially to the women and children working exceedingly long hours in extremely unsafe working conditions. They began demanding that government step in with laws and regulations to protect people from such abusive conditions.
What they failed to recognize, however, is that when overall society is impoverished, families will do anything to survive, including sending the entire family to work in unsafe conditions. After all, when the choice is between death by starvation and working long hours in an unsafe factory, everyone is going to choose the latter. But then as wealth is accumulated and the standards of living rise, people will be able to choose better ways.
Moreover, people began seeing the vast amounts of wealth created by this unusual system and became consumed by envy and covetousness. They demanded that government step in to “equalize” wealth by seizing money from those who owned it and transferring it to those who didn’t own it. The income tax and the Federal Reserve System came into existence in 1913.
Americans abandoned the system of open immigration on which our nation was founded in favor of the socialist principle of central planning, thereby bringing about continuous decades of crisis, chaos, death, injuries, and an immigration police state that has never succeeded, and never will.
They also supported the rise of empire and foreign intervention, which led to the Spanish-American War, World War I, and World War II. After the Second World War, the Cold War and the anticommunist crusade brought about the conversion of the federal government to a national-security state, which wielded omnipotent, totalitarian-like powers. Americans were now living under a regime that our American ancestors had feared — one that wielded the powers of assassination, torture, secret surveillance, and other violations of civil liberties and privacy.
There were those who were concerned about alcohol and drug consumption. Americans therefore enacted a constitutional amendment and laws to criminalize the possession and distribution of such substances, contrary to what had been the case throughout the 1800s.
With the adoption of Social Security in the 1930s by President Franklin Roosevelt, America was transformed into a welfare state, one that was based on the socialist principle of using the coercive apparatus of government to take money from one group of people and give it to another group.
This was followed in the 1960s by the adoption of Medicare and Medicaid, which succeeded in destroying what had been the finest health-care system in the world and hurling America into a perpetual health-care crisis.
Without even the semblance of a constitutional amendment, the FDR regime abandoned the gold-coin, silver-coin standard that had been in existence for more than 100 years. FDR nationalized gold and made it a felony offense to own it. America’s monetary system was converted to paper money, a system that the Framers had rejected. That began a continuous process of monetary debauchery, one that had characterized regimes throughout history.
At the same time, war, strife, and conflict became a permanent feature of American life, killing and injuring countless millions of people all over the world, including Americans. Civil-rights leader Martin Luther King correctly described the U.S. government as the greatest purveyor of violence in the world.
At the same time, federal spending and debt soared, threatening the nation with national bankruptcy. Decade after decade, the Federal Reserve plunged the nation into an endless cycle of booms and busts and, at the same time, impoverishing countless people with its inflationary policies.
Meanwhile, the national-security state has produced an endless stream of wars and conflicts, some of which may push America toward all-out nuclear war with Russia and China.
At the risk of being trite, it would be safe to say that America is at a crossroads. The question naturally arises: Which way forward? The answer seems obvious.
This article was originally published in the April 2024 issue of Future of Freedom.
